Pound Australian Dollar (GBP/AUD) Remains Subdued amongst Persistent BoE Rate Hike Bets
(Updated 16:31 27/04/23)
The Pound Australian Dollar (GBP/AUD) exchange rate has changed little from its starting position today. A mixed market mood may be capping gains for the pairing.
Expectations of a dovish stance from the Reserve Bank of Australia (RBA) may be limiting deeper losses for the exchange rate, though. The RBA is expected to leave interest rates unchanged at tits monetary policy meeting next week.
Speaking on the RBA’s next rate hike call, ING’s Head of Asia-Pacific Research Robert Carnell said:
‘Having paused its rate tightening in April to gather more information, the RBA will likely see a further fall in inflation rates which will not provide any justification for additional tightening at this meeting.’
Finally, GBP/AUD may be finding support from Bank of England (BoE) rate hike bets. Thin trading conditions for the Pound (GBP) means that BoE rate hike bets have been a likely driver of any movement in the currency.
At time of writing the GBP/AUD exchange rate is at around AU$1.8859, essentially unchanged from this morning’s opening figures.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Trades Narrowly amid Risk-On Sentiment
The Pound Australian Dollar exchange rate is trending sideways today. An upbeat market mood may be capping any gains for the pairing.
A sharp rise in Australian export prices may also be limiting GBP/AUD’s upward movement today. However, the exchange rate could be seeing more drastic losses prevented by persistent Bank of England (BoE) interest rate hike bet.
At time of writing the GBP/AUD exchange rate is at around AU$1.8851, which is virtually unchanged from this morning’s opening figures.
Australian Dollar (AUD) Edges Higher as Export Prices Soar, Muted Against GBP
The Australian Dollar (AUD) is firming today, although is only seeing limited movement against GBP. Buoyant export data could be boosting AUD. A recovery in risk appetite may also be bolstering the risk-sensitive ‘Aussie’.
Australian export prices rose by 1.6% in the first quarter of 2023 due in part to the removal of Covid-19 restrictions in China. The easing of restrictions also led to a rebound in iron ore demand which added to the export price increase.
An above-forecast fall in import prices limited the positive impact of the export figures, however. First quarter import prices slumped by 4.2% amid weaker demand and soaring inflation.
The ‘Aussie’ could also be coming under pressure from evidence of poor performance in the Chinese industrial sector. Profits for Chinese industrial firms fell by 21.4% from January to March of this year. Whilst the decline was a slight improvement from the previous reading, it was much greater than 12% drop expected.
Additionally, dovish expectations for the Reserve Bank of Australia’s (RBA) forward path could be weighing on AUD today. Yesterday’s cooler inflation figures have seen markets pare back bets on additional rate hikes from the central bank.
Pound (GBP) Slips amid Thin Trading Conditions
The Pound (GBP) is trending lower today. A lack of data for the currency may be leaving GBP vulnerable to market mood.
Domestic headwinds may be pulling the Pound lower today. UK Prime Minister Rishi Sunak has come under criticism regarding his government’s most recent illegal immigration bill.
Expectations of additional interest rate increases from the Bank of England may be cushioning Sterling’s losses, though. A 25bps hike from the central bank in May is thought to be highly likely.
Speaking on the BoE’s forward path, ING’s Developed Markets Economist James Smith said:
‘If services inflation continues to trend higher and recent survey evidence showing reduced price pressures begin to revert, then the Bank could go further – though the three or four rate hikes markets are currently pricing appears extreme.’
GBP/AUD Exchange Rate Forecast: Will Australian PPI Rise Prompt RBA Bets and Bolster AUD?
The Pound will see a sparse data calendar over the rest of the week. Shifts in risk appetite could affect Sterling amid a lack of other drivers.
However, GBP may find some support from BoE rate hike bets during the remainder of the week. Markets are continuing to price in a 25bps hike from the central bank at its May meeting.
For the Australian Dollar, a forecast uptick in first quarter PPI could lend support to the ‘Aussie’. Recent inflation data has trended lower however, and a surprise to the downside could cause AUD to tumble.
The ongoing recovery in iron ore prices could also keep AUD buoyed over the rest of the week.